Mutual
fund industry has grown impressively during recent years in Pakistan, however it
is still young as compared to other countries in the region.

SADAF AURANGZAIB
June 05 - 11, 2006

There are very few companies that are
known as asset management companies that are providing the advisory services to
their clients on various dimensions of capital market. One of them is Dawood
Capital Management Limited. We got the chance to talk to Tara Uzra Dawood, the
CEO of DCM Limited. T.U. Dawood is a graduate oh Harvard Law School, she is a
vibrant and young lady who have strived to come to a position where she is
today. For her Success is achieving one's goals and making a positive difference
in the world. Let us see what she says about the current situation of mutual
fund investment in Pakistan.

PAGE: First tell me a little about
yourself and how do you get into the mutual fund business?

Tara Uzra Dawood:
I am by profession a lawyer and a member of the New York bar, but when I
graduated from Harvard Law School, Boston, USA, in 2000, I moved to Karachi and
began working for Pakistan Venture Capital Ltd. (PVCL) as Executive Director.

PVCL was formed in 1990 and is the
brainchild of Asian Development Bank, Manila (ADB). ADB continues to sponsor the
company today, along with the First Dawood Group. At that time (2000/2001), it
was too risky to invest in most new ventures and the company -- desirous of
making profits -- concentrated on money market transactions to great success.
Thus, in 2003, at the suggestion of ADB, PVCL was converted into an Asset
Management Company (AMC), a nascent and up-and-coming industry in Pakistan. Its
new name was Dawood Capital Management Ltd. (DCM) and DCM is currently not only
the listed company in Pakistan but is the one with social consciousness as well
because of the Asian Development Bank's sponsorship.

In April 2004, I became CEO of DCM.

PAGE: Does DCM deal with mutual funds?

TUD:
An Asset Management Company is a provider of investment advisory and asset
management services. We currently have an open end income fund Dawood Money
Market Fund (DMMF). DMMF only invests in fixed-rate of return instruments and
has been rated 5 star by PACRA which is the highest possible rating. We also
have a closed end asset allocation fund First Dawood Mutual Fund (FDMF) that
invests in both debt and equity instruments. We will soon be launching a shariah-compliant
open-end fund Dawood Islamic Fund (DIF).

DMMF ESSENTIAL INFORMATION:

Net Asset Value

Rs. 109.3755 (par value was Rs.
100)

Return for Year to date

11.36% per annum

Type of Fund

Fixed-Income

The asset allocation of the Fund is as
under:

TRACK RECORD:

DMMF continues to be a profit leader.
In June 2004, the Fund paid a competitive dividend of 7% compared to a rest of
money market industry average of 6.2% and in June 2005, DMMF gave back to its
unit holders 9.7% compared to a rest of industry average of 8.5%!!! For the
half-year ended December 31, 2005, Your Fund's return was 10.59% compared to a
rest of the industry average of 9.37%.

PAGE: Mutual funds operate in three
different segments i.e. stock, bonds and cash... how does it work and make
money?

TUD:
Well mutual funds as opposed to money market funds are usually equity or both
equity and debt based. Mutual and money market funds are an incredible
opportunity for investors to make money because the fund manager is dealing with
large volumes of money and so can get better rates and opportunities than an
individual would get for investment. Thus, individuals benefit greatly when
investing in a fund. That being said, the quality of the fund manager is very
important in determining the Fund's success.

PAGE: If I ask you about the current
status of the mutual fund investment in Pakistan, what would you say?

TUD:
It's still a nascent industry with an incredible opportunity and growth
potential. Less than 1% of Pakistan GDP is currently invested in mutual funds
compared to over 20% in India and over 100% in America. Open end mutual funds
are the perfect alternative to bank accounts because for example in our DMMF, we
are giving about 12% annualized return at the moment and you can access your
money with approximately 3 day notice, compared to the 4.5% or so most bank
accounts are giving on their current accounts.

PAGE: But literature on market
efficiency suggest recommends passive investment as they suggest that paying
money to so called investment professionals is a fool's game ... how do you
respond to that?

TUD:
Well, I don't know who has written it but I would suggest that before going to
any investment advisor we strongly recommend that you research who that person
is and their credibility. That being said I personally have been trained in
Investment Advisory Core-Satellite Approach which has been written about and
taught extensively in leading international business schools and journals. To
our knowledge, DCM is the only group in Pakistan offering this particular
approach which is capable of generating tremendous profits depending on original
asset allocation and risk profile.

PAGE: How sound professional management
should be to operate mutual funds?

TUD:
It is an extremely big responsibility to manage anybody's or any corporation's
finances. We at DCM do not take this responsibility lightly. We are confident
that others in the industry are equally professional and committed to providing
standard services but we can truly only comment on ourselves and we know that it
is vital for us to give premier services and we are very dedicated to that
pledge to our clients.

PAGE: How productive is the use of
effective risk management in mutual funds?

TUD:
Risk management is the most important aspect for any company to move forward,
especially companies such as ours that our responsible for other people's funds.

PAGE: But the fluctuation in stock
market, how does it influence the risk management?

TUD:
Any situation with stocks always involves a higher level of risk than debt
instruments. We advise individuals who wishes a low risk setting to invest in
fixed-rate of return income funds such as DMMF that have a 5 star rating. DCM
Investment Advisory Services offers five different kinds of risk profile
baskets. We offer low risk, medium risk, high risk, volatile/unpredictable risk
and shariah-compliant baskets. We also personalize baskets according to
individual clients needs upon request.

PAGE: How strong should be the
portfolio of the company to get the maximum returns?

TUD:
As strong as it can be. Our portfolio is well diversified to give balanced and
secured return to the unit holders.

PAGE: And how does that possible?

TUD:
Well that's where our expertise comes in. It's our job to ensure that we invest
in the wisest and savviest instrument because as professionals we have access to
better return and opportunities than individuals usually have. That is the
benefit and service we offer our clients.

PAGE: In the west there is this concept
of index funds however it is not materialized here?

TUD:
Our industry is still nascent in Pakistan. However there is already one index
fund. More and more types of funds will be coming up in the next few years.
Being a part of the mutual fund industry in Pakistan we have the opportunity to
introduce a variety of opportunities into this market that have been
experimented upon abroad and we can localize them for an individual market.

PAGE: Is the mutual fund investment
guaranteed by the Pakistani government?

TUD:
No, in fact there are disclaimers placed on everything stating clearly that
there are risks involved. Investments are not guaranteed but what the government
has done to help promote this industry. The SECP has laid down rules and
regulations to manage mutual funds where they have restricted investment on a
particular issue as well as on any one sector.

PAGE: What suggestions would you like
to give to the investors when they are investing in certain firms?

TUD:
Before making any investments, you should look into the consistency of
performance, rating and quality of management of that particular firm and fund,
as well as take into account your own risk appetite.

PAGE: And how it's possible to look
into these things prior investing in any fund?

TUD:
PACRA and JCR are two leading agencies who rate the asset management companies
and their ratings. Ratings are mandatory by law for all funds and AMCs over 1
year old. This rating has to be disclosed so that's very important factor.
Furthermore you should look at the group or the company or the people behind the
company, you should look at the asset fund manager and you should look at the
portfolio of investment. DCM also strongly recommends diversification of
investments at all times to minimize risk.

PAGE: What is the probable size of the
mutual fund in the market?

TUD:
Currently, the industry is over Rs.100 Billion in size which is not nearly as
large as it can be and will be.

PAGE: And how do you see the role of
mutual funds in capital formation and how do you see the role of government in
this regard?

TUD:
The government policies governing mutual funds are totally organic. We have an
incredible Securities & Exchange Commission (SECP) that regulates this body.
They are very accessible, very much committed to providing a world class
standard industry so they are continually providing rules and guidelines and
structures to enable this industry to grow well at all times with also
protecting the interest of investors too.

PAGE: What factors do affect the growth
of mutual funds in terms of its performance?

TUD:
Quality of fund management, market conditions, among other things.

PAGE: Mutual fund is a safe investment
but general public has less interest in that, why is that so?

TUD:
It is so important to remember that it is a very young industry. Further, our
culture is such that a large segment of our population doesn't even invest in
bank accounts so there is a huge education progress needed.

PAGE: How do you see the upcoming
budget, would there be any incentives for this industry?

TUD:
We will have to wait to see but we expect the budget to be in line with past
budgets.

PAGE: How do you think DCM is different
than other mutual fund investment advisories?

TUD:
We are the only asset management company to our knowledge in the world to
provide the investors with loyalty cards which is our way of thanking our loyal
unit holders. We also committed to having a pro bono wing to our business that
enables women and children to benefit from the financial sector. Thus, we have
launched BABYFUNDTM children's trust funds and SHAADIFUNDTM jehaz funds, where
we have waived our commission. We are currently in the progress of constructing
our website www.fundbaby.com which is full of value added services for this
market

In addition to our money market and our
pro bono BABYFUNDTM and SHAADIFUNDTM, we are prioritizing the development of
wealth management services and have introduced individual and corporate
investment advisory services. Thus, DCM is expanding.